The Hidden Hurdles of Using a General Durable Power of Attorney

What is just as frustrating as waiting in line at Social Security to be appointed as your client’s Rep Payee? If you guessed providing a General Durable Power of Attorney (GDPOA) to a financial institution when your client becomes incapacitated, you’re absolutely right!

A General Durable Power of Attorney is a foundational estate planning tool. It’s a legal instrument that grants an individual, the agent or attorney-in-fact, the authority to make financial decisions on behalf of the principal, particularly in the event that the principal becomes incapacitated. The GDPOA is designed to provide continuity and ease the burden of decision-making during a difficult time. Unfortunately, the practical use is often anything but seamless. This article explores the hurdles that GDPOA’s can present so that you can work proactively with your clients to navigate the system.

Disconnect Between Legal Intent and Practical Application

Although a GDPOA is meant to streamline financial decision-making, the reality is that many agents face significant obstacles when presenting it to financial institutions. Financial institutions have stringent verification processes to protect against fraud and unauthorized access. As a result, agents may face hurdles as banks require extensive documentation to authenticate the GDPOA. This can include:

• Original or certified copies of the GDPOA.
• Identification for both the principal and the agent.
• Bank-specific forms that may need completion before the GDPOA is accepted.

These verification processes are important for protecting clients, but they can also create bottlenecks for agents who are acting in good faith.

Inconsistencies Across Financial Institutions

Each financial institution has its own set of policies regarding the acceptance and processing of GDPOAs. These policies can vary widely, leading to inconsistencies in how agents are treated across different institutions. As a result:

• Delays may occur as the institution reviews the GDPOA.
• Additional legal opinions or documentation may be requested.
• The GDPOA might be rejected if it does not meet specific criteria set by the institution.

These delays can be stressful if the principal is urgently in need of financial support or if time-sensitive decisions must be made.

Knowledge Gap Among Financial Professionals

Another challenge is that bank employees are not always familiar with the nuances of GDPOAs. If the document is complex or if the employee has limited experience handling such documents, misunderstandings can arise. This can result in:

• Misinterpretation of the powers granted under the GDPOA.
• Increased processing time as employees seek guidance or escalate the issue internally.
• Requests for unnecessary documentation or information.
• Being asked to bring an incapacitated client to a branch to sign paperwork allowing use of the GDPOA.

Priorities of Financial Institutions

Financial institutions prioritize security and compliance with legal standards, which can sometimes conflict with the ease of using a GDPOA. Concerns include:

• Potential liability for processing transactions under a potentially invalid or revoked GDPOA.
• Fraud prevention measures that may complicate the use of the GDPOA.
• Compliance with state-specific laws that may affect the GDPOA’s acceptance.

Proactive Planning is Key

The best way to avoid complications is to take proactive steps before the GDPOA needs to be used. Clients should:

• Notify their financial institution that a GDPOA is in place.
• Ask about any institution-specific forms or procedures.
• Submit the document for review in advance and ask for confirmation of acceptance.
• Consider consolidating accounts with institutions known to be more GDPOA-friendly.

While advance preparation won’t guarantee a smooth process, it can help identify and resolve issues early—saving time, frustration, and unnecessary roadblocks during a time of crisis.

The General Durable Power of Attorney is a powerful tool, but only if it works as intended. Attorneys, clients, and agents alike should be aware of the real-world complications that can arise and plan accordingly. With proactive communication, thorough documentation, and patience, it is possible to navigate the system and uphold your client’s wishes when it matters most.

About the Author

Kathleen Miller, CTFA, ATFA, MBA
Founder & President Graceful Fiduciary Management

Kathleen brings over 20 years of experience in the Financial Services sector, focusing primarily on Fiduciary Administration and Development.

The opinions expressed in this article are solely those of the author and do not reflect the views or endorsements of the American Heart Association (AHA). The AHA does not endorse or assume responsibility for any information or opinions presented in this article.